Australia: Managing costs in medical negligence claims

A medical negligence case is, simply, a claim for compensation arising out of injuries suffered in the provision of medical services by a medical practitioner, allied health professional or a hospital. Medical negligence law is both a complex and sophisticated area. Establishing negligence can be akin to finding a needle in a haystack and therefore every case must be managed with certain skill.

In each case, expert evidence must accompany the pleadings at the time of filing the documents (Uniform Civil Procedure Rules 2005 (NSW) r 31.36). Unlike a typical personal injury matter, in medical negligence, you run a risk by proffering res ipsa loquitur for the purpose of proving negligence on elements of alleged negligence in the case because questions in medicine can be obscure and therefore necessitate expert analysis. In matters of large value, spending money on both liability and quantum evidence is justified in circumstances where most of the plaintiff's costs can be recovered from the defendant. The challenge in cases that are moderate or worse, modest in value, arises because the plaintiff is still required to prove the case but is limited in what they spend on the evidence required due to the cost recovery prohibitions imposed by the law. So how does a lawyer successfully manage such smaller cases when the legal issues remain the same, irrespective of the assessment of damages?

Expert evidence and early settlement

In medical negligence matters, it is important to have an established rapport with your expert. In that setting, the expert should initially be approached on a preliminary basis and their opinion sought on an informal basis. The expert can be asked to assess your client and their combined opinion sought on both questions of liability and quantum. This exercise may not only save time but also significant costs in the long run. The haphazard approach adopted by some legal practitioners where experts are delivered a brief and then given free reign with a written opinion is incongruous. This applies particularly in smaller claims where cost considerations are paramount to your client's net result. It is also vital that your experts are armed with all the relevant information. A comprehensive client statement is usually the key to the list of assumptions provided to the expert and can result in the case's quantum leap.

In a modestly valued claim, the liability report must be firm and conclusive. Without this quality to it, there is a definite risk in litigation, in that the cost of debating the issue of liability through further expert evidence, evidence in reply and conclaves may swamp the outcome to your client. With the benefit of an early and unequivocal expert opinion, one can avoid the potential snowball effect with costs.

While Root Cause Analysis ('RCA') reports are inadmissible at trial, they can be referred to in letters to the defendant and can be utilised as a bargaining chip in early settlement negotiations. The RCA often encapsulates the crucial issues in the matter and can be incorporated into a letter of demand, with a summary of those issues, seeking an admission of liability. This can serve to minimise costs and the time associated with obtaining expert evidence.

While admissions of liability in medical negligence cases are rare, reaching an agreement (even an informal one between legal representatives) as to the issues on breach of duty of care and causation can also facilitate early settlement negotiations. Where proving breach of duty of care or causation requires evidence from experts of different specialties, one may consider obtaining evidence on the weakest aspect of the case and serving it. This may assist with reducing the issues in dispute, particularly the appropriate discount for the risk of losing, and can serve to bridge the gap between settlement offers.

With an insured defendant, contact should be initiated and details of that defendant's insurer or their solicitors can be requested. Often, a defendant appreciates this type of discretion and this can fuel their desire to press their insurer for a quick and efficient resolution of the matter. A comprehensive letter of demand should follow and the front-end loading approach of providing the defendant with all the relevant documents to the claim should be adopted. Defendants rarely shy away from a well articulated offer of settlement in smaller claims. Defendants are mindful that early resolution of a small claim can be in the best interests of all parties, particularly when the plaintiff is impecunious. Insurers have pecuniary considerations at the forefront of their minds and hence, they are aware that an early payment to the plaintiff today, rather than one or two years into a costly litigation, will serve to advance their commercial interests.

Formal settlement offers

If damages equate to $100,000 or less, the party/party costs' recovery from the defendant is restricted to the greater of $10,000 or 20 per cent of the damages (Legal Profession Uniform Act 2014 (NSW) s 338). This does not include disbursements which are recoverable so long as they are reasonable and necessary. Disbursements do not however include Counsel's fees. In modest claims, consideration should therefore be given to not briefing Counsel unless a hearing is likely. This restriction on costs recovery can be obviated by a written offer of settlement which can give rise to an award of indemnity costs.

In an unlitigated matter, a Calderbank offer can be served in the proper form. In smaller matters, this should annex a synopsis of damages and all relevant supporting documents. In a litigated matter, a properly formulated Offer of Compromise should always be served.

In Khan v Rathjen (2016) NSWDC 139, a heavily contested matter, judgment for the plaintiff was obtained in the sum of $206,000 and an additional order was made for payment of the plaintiff's costs on an indemnity basis from 3 December 2015, the day after the plaintiff served an Offer of Compromise which was rejected by the defendant. The claim related to the defendant's failure to properly assess and diagnose severance of the tendons in his left middle finger and to refer the plaintiff for appropriate treatment and investigations. The award of indemnity costs made a significant difference to Mr Khan's net compensation result.

It is also important to bear in mind whether a Calderbank offer, or Offer of Compromise, has an element of genuine compromise. This may be questionable in cases where the plaintiff's offer is to settle for the full value of the claim, or where a verdict for the defendant is offered in circumstances where the plaintiff has supportive expert evidence. Walk away offers from defendants can be construed as genuine if they involve the saving of significant costs (Leichhardt Municipal Council v Green [2004] NSWCA 341).

Conclaves

Expert conclaves are now part of court process and involve a conference of experts of the same specialty where they address previously decided questions in order to produce a joint report to the Court. Conclaves are designed to facilitate in the hope of narrowing down the issues between the parties, thereby promoting settlement negotiations and reducing the hearing duration and associated costs. Often, matters settle shortly after a conclave report is produced because the tenacity and reliability of one side's expert pushes the other side into a settlement. Choosing the right expert can truly pay off at the conclusion of this process, particularly in a small matter.

Where the experts' opinions are largely the same (for example quantum reports from psychiatrists with an agreed diagnosis but differing prognoses), the divergence in liability experts' opinions is due to factual assumptions or where there is no commonality between their expertise, the utility of conclaves is often outweighed by the associated expense. In these circumstances orders should be sought (prior to a hearing) for the parties to be excused from the process.

To expand on this further, a conclave resulting in the experts agreeing that the defendant is liable if the plaintiff's facts are believed but not liable if the defendant's facts are believed, is unlikely to facilitate a settlement since factual disputes are determined at trial and not by the experts. For example, in Spasovic v Sydney Adventist Hospital [2002] NSWSC 164 the second defendant's notice of motion for orders to conclave was dismissed as the Court was not satisfied that the possible utility test was met. There were factual disputes affecting the experts' opinions. The doctors would have needed to express their opinion based on alternative assumptions of fact and this was unlikely to assist in the early resolution of the case.

Conclusion

Practitioners should not be deterred from investigating and litigating smaller medical negligence claims. Despite the hurdles and restrictions at law, with experience and the exercise of good judgment, these claims can be successfully managed to conclusion and satisfactory results obtained for your client.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.